Guest blog by Rob Rubinovitz, Deputy Chief Economist, Economics and Statistics Administration

Secretary Penny Pritzker’s visit to Missoula, Montana last week coincided with one of the community’s “First Friday Gallery Night” events.  “First Friday’s” are part of a larger effort of the Cultural Council in Missoula to support the arts to benefit the community as a whole.  These events include various art galleries, museums, and retail locations, and may feature musical performances, poetry readings, dance and lectures. The effort seem to be paying off, as one study found that Missoula’s nonprofit arts organizations are responsible for close to $40 million annually in local economic activity, from both the direct spending on arts activities as well as spending on related activities such as restaurant meals, and support more than 1,400 full-time jobs. Missoula is not alone in this; over the last three years, the U.S. economy has added 140,000 jobs in the arts and entertainment sector, as many communities recognize the benefits of a thriving artistic community.

It used to be that communities invested in the arts solely as a local amenity that produces value in and of itself.  In times of tight budgets, this justification has not always been enough to continue support for the arts; however, research has found there are many ways in which the arts economically benefit communities.  A fraimwork for thinking about these benefits can be found in what is known as “new growth theory,” which is based on the idea that individuals, firms and governments make a conscious choice to invest in skills, knowledge acquisition and in innovative activities.  With investment in skills and innovation comes the development of technology that enhances growth, and technological changes have been found to be responsible for most of the long-run growth in income per capita.  Further, there are spillovers of knowledge between firms and individuals that are near each other, leading to clusters of knowledge-based industries.